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11 End Game

Howard H. Lewis Indiana University Press ePub

11

End Game

In the fall of 1980, as we finished the cross-examination of the government’s witnesses, we all turned to writing our briefs, though I, and I think many others, had already started drafting portions of what we wanted to present. Since the court had heard no testimony and had not been given the written evidence, let alone the discovery and cross-examination transcripts, both our cases and the government’s consisted entirely of these briefs and the excerpts of evidence each side wanted to present in the form of appendices. Our briefs were due on January 12, 1981, and the government’s some six weeks later. In the midst of the frenzied assembly of the summary of six years of intense work which consisted of the careful sifting and organizing of the mass of evidence and forming it so that it told a coherent story, two cataclysmic events occurred.

First, Ronald Reagan was elected president, and Drew told us all that he was quitting as trustee to become secretary of transportation. In short, he was switching from being our leader to leading the opposition. The problems of conflict of interest—of how we could get an unbiased hearing before the court or even the appearance of an unbiased hearing—appalled me. I tried as much as I could, since we were never really intimate, to urge him to take another post. “How about Commerce,” I said. “You have an extraordinary record as a business doctor, a fixer of troubled companies. Or how about Treasury—you at least can read a balance sheet, which is more than many of your predecessors could do.”

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9 The Rail Use Case: Ours and the Government’s

Howard H. Lewis Indiana University Press ePub

9

The Rail Use Case: Ours and the Government’s

It was essentially the transferors’ burden to demonstrate the value of their properties in continued rail service. The government’s primary contention, by contrast, was that absent Congressional action expressed in the Rail Act, the railroads in the Northeast would simply have disappeared, replaced by trucks on a much expanded highway system, ships on an enhanced intercoastal waterway, increased air freight, and I guess snowshoes. The government believed its role was counterpunching, that is, demonstrating that our contention would not have worked and that our properties would be largely ignored by profitable roads, or at best bought for a pittance no greater than what they would have yielded in liquidation for nonrail use.

My approach of beginning at the end of the case by imagining oral argument had the advantage of focusing my mind and the work product it developed, so that I didn’t range over a mass of fact and speculation trying to find the compelling argument emerging from the jumble like weeds sprouting in a yard. Admittedly, it had the disadvantage of limiting inquiry, so that I might well overlook a big piece of evidence which a less structured, more open investigation might have revealed. The truth is, however, I really had no choice, since the timetable set by the court effectively precluded any kind of full-range inquiry given the limited resources available to me and my own physical capacity.

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10 The Government’s Case

Howard H. Lewis Indiana University Press ePub

10

The Government’s Case

The government’s case came in two parts. The first, developed to considerable extent in the Final System Plan, was an argument that the country could, if necessary, do without railroads in the Northeast altogether. We thought this contention patently absurd. Indeed, during his examination, one of the government’s key witnesses, Edson L. Tennyson of the Pennsylvania Department of Transportation, blurted out in exasperation, “Who’s kidding whom? You simply can’t move ore, coal, or grain in the Northeast by land except by rail.” We then set about disproving the government’s assertion by specific examples.

The second prong of the government’s attack was to concede, arguendo, that rail service was indispensable, but to insist that the bankrupt railroads were such hopeless losers that the public, state and local governments and authorities, and the profitable western roads would pay next to nothing for the properties, certainly no more or just a little more than they were worth in liquidation for nonrail use. Their value then would be what the government contended in the Final System Plan. The fundamental thrust of our argument that the government brought the disaster on the railroads was aimed at countering this contention. According to us, if only the government ceased its interference through both regulation and cross-subsidy, the railroads would return to profitability.

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• Epilogue

Howard H. Lewis Indiana University Press ePub

Epilogue

They’re all dead now, mostly. The three judges of the Special Court; Joe Castle, after typically ignoring his doctor’s order not to visit his daughter in Denver because of the altitude; Lock Fogg and Bill Hesse in the fullness of their years, fully vindicated as to the value of their railroad. Grant and Tom—Grant from too much alcohol over a long period of time, Tom from a surplus of cigarettes. Bill Dimeling and Jim Sox, way too young. Of the list of the fallen, two deaths affected me the most.

The first was Henry Friendly’s. When I read of his suicide in March of 1986, I found myself sobbing uncontrollably, which was totally inexplicable since I never really knew him at all, not even to exchange as little as a civil greeting: “Good morning, Mr. Lewis.” “Good morning, Your Honor.” Our “relationship” consisted of my attempts to answer his unending stream of highly intelligent and provocative questions and make as clear and convincing as possible our arguments for the valuation of what I now felt to be my railroad, in view of my contribution to a legal proceeding he created, structured, and managed in order to solve one of the most complicated and novel legal problems ever to exist in American jurisprudence. In the course of the five years we were together (longer than many marriages), I became persuaded that he epitomized the best of my profession: extraordinary intelligence; a determination to work harder than anyone should; a willingness, indeed eagerness, to explore all the issues in the case; an ability to control the litigation so that it moved at an extraordinary pace without giving anyone cause to complain that they had not been heard; and of course, total honesty and integrity. The most vivid memory I have of him now is posthumous. Several years after Friendly’s death and several years before his own, I entertained John Wisdom following a talk he gave at my request at the Historical Society of Pennsylvania, when he told me the following story in private: On the night he took the suicidal overdose of pills, Friendly wrote a number of letters. The one he wrote to Wisdom went something like this:

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2 The Gathering Storm

Howard H. Lewis Indiana University Press ePub

2

The Gathering Storm

After the passage of the Rail Act in January of 1973, I decided it might be a good idea to read it. The act introduced an entirely new concept into American bankruptcy law: the idea of dual reorganization. Under it, the rail operations of the several railroads in bankruptcy in the region, defined as the northeast quadrant of the United States—namely, the Penn Central (much larger than the rest of the roads combined), the Reading, the Lehigh Valley, and the Central Railroad of New Jersey (all roughly the same size), the Ann Arbor and the Lehigh and Hudson River (much smaller), and later the Erie Lackawanna (smaller than Penn Central but much larger than Reading)—were to be split off from the remaining properties of the bankrupts and formed into a new government-controlled railroad called Conrail. The remaining properties were to continue in reorganization under Section 77, from which the creditors and possibly the stockholders would receive relief in the form of stock, cash, or new debt in many possible forms. The bankrupts would also be given interests in the new railroad in compensation and substitution for their transferred rail properties.

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